Investment of billions in VR is increasingly looking like corporate hubris

Meta has already started slimming down its virtual operations. Disney is cutting its division. Microsoft is shutting its unit. The metaverse, the imaginary universe we were all meant to migrate to just a couple of years ago, is turning into a great corporate collapse, at least in the immediate term, with billions of dollars of investment at risk, and reputations taking a hammering.

The Internet giants have built a vast new world, only to discover that many people don’t want to go there. As we can see in the statistics on everything from online retailing to air travel, we are moving back into the real world at an accelerating pace following the Covid-19 lockdowns. Mark Zuckerberg’s Meta lost $13.7bn last year, the result of soaring metaverse costs, increased competition from TikTok, Apple’s privacy update and broader economic headwinds. The founder who changed the world from a Harvard dorm is turning into a Howard Hughes-like figure, isolated and out of touch with reality. It’s increasingly looking like one of the most important examples of corporate hubris.

Disney is reportedly axing its metaverse division, created in 2021 presumably in the hope that we would all decide to take the family to a place that was even more synthetic than its theme parks.

Microsoft, meanwhile, has disbanded its Industrial Metaverse unit, which was tasked with making software for manufacturing operations that were purely virtual. The company has apparently decided to let others develop the technology, with a view to then elbowing in on the strength of its Windows operating system.

Apple seems to have just about given up on its virtual reality headset. Perhaps it is concentrating on designing some new features to entice more iPhone users to upgrade. Even Tinder is scaling back, with the company announcing last year that it was putting its plans for dating in the metaverse on hold, presumably because no one really wants to date an avatar. It’s starting to feel like the last person to leave the metaverse will need to turn off the lights — except there aren’t many on.

For a start, we are all a lot more attached to reality than some tech billionaires in California may realise. Part of the metaverse’s troubles lie in the fact that nobody really understands what it is, though it should be viewed as distinct from virtual reality gaming — which is expected to expand significantly in future. But when it comes to Meta’s self-described “virtual spaces where you can create and explore with other people who aren’t in the same physical space as you”, the story is rather different. We may like to dip into the virtual world to play Half-Life: Alyx, but for most people this is a hobby.

In December, online sales fell to 26pc of the amount of money we spend on stuff in the shops, compared with a peak of 38pc in January 2021. The online food delivery companies are starting to retreat as some of us work out that we might as well pop out to a restaurant to eat rather than pay to get the same meals, though lukewarm, delivered to our home. Likewise, air travel is booming again, as we realise that we would rather visit some real places instead of slipping on an Apple headset and travelling online. It is not that the online universe is going to disappear, but rather that it may have reached its limit — for now.

When you buy property or assets in the real world, it has a value because there is a finite amount of it. In the metaverse, space is infinite, meaning it is harder to drive value. Which brings us to arguably the biggest challenge: the threat to internal privacy. Many people are understandably troubled that big tech could monitor them at an almost forensic level, gaining access to emotional, biometric and physiological data.

Lastly, too much money has chased some flimsy ideas. When we are all stuck at home during lockdown, and central banks were still printing money like there was no tomorrow, it was a lot easier to imagine that virtual worlds would be the next big thing. With money tighter, and the global economy on shaky grounds, it is a lot harder.

Tech innovators sometimes think in terms of the hype cycle: the roller coaster journey from concept to widespread adoption. It looks like huge sums of investor money have been spent on a technology whose potential has yet to be realised — and may never be. TelegraphIndia